By Michele Pek and Gabrielle Ng
Singapore (Reuters) – South Korean petrochemical companies LG Chem and Lotte Chemical both made losses in 2024, dragged down by oversupply which is set to persist this year, while trade turmoil has dampened the global economic outlook, company executives said this week.
Petrochemical producers in Europe and Asia have been consolidating, as years of capacity build-up in top market China and high energy costs in Europe have squeezed margins.
Lotte Chemical, which reported results on Friday, showed that its 2024 operating losses deepened by some 157% year-on-year to 895 billion won ($619.62 million). This marked its biggest loss in operating income since 2011, the company’s data showed. Financial data from before 2011 was not publicly available.
The company’s basic materials division, which includes petrochemicals, cut its operating loss by roughly 52% in the fourth quarter from the previous quarter to 175 billion won.
LG Chem, which reported earnings on Monday, showed that 2024 operating profits fell 63.75% from the previous year to 916.8 billion won, the lowest since 2019.
Its petrochemical division posted a fourth-quarter operating loss of 99 billion won.
Both companies cited a global glut as a key problem in the petrochemicals industry.
“The continued market downturn was driven by an oversupply in Northeast Asia from continued capacity expansion and China’s sluggish economic recovery,” Yang Cheol Ho, head of strategy for LG Chem’s petrochemical division, said on a call on Monday.
Oversupply is expected to persist for years with new plants still coming online in the Middle East and China.
“We do expect continued overcapacity and uncertainties in global demand, especially under Trump 2.0,” a senior Lotte Chemical executive said on Friday.
U.S. President Donald Trump has imposed 10% tariffs on all Chinese imports, prompting retaliatory duties from China.
Both companies, while noting recovery in Chinese demand was slow, were largely optimistic about demand recovery in the sector’s biggest consumer.
“There are very strong measures being taken to try to stimulate consumption,” an LG Chem company spokesperson said, adding that this could lead to a gradual recovery in domestic demand in China for home appliances.
A Lotte Chemical spokesperson said they are waiting for further announcements from Beijing on its stimulus plans in March.
Beijing in January added more home appliances to the list of products in its consumer trade-in scheme in an effort to revive its struggling consumer sector.
The stimulus scheme boosted last year’s consumption growth by more than 1 percentage point, according to the country’s commerce ministry.
LG Chem is targeting revenues of 26.5 trillion won in 2025 and is likely to maintain its capital expenditure at close to 2 trillion won. It cut its capex last year by around 30% from 2023.
($1 = 1,444.4300 won)
(Reporting by Michele Pek and Gabrielle Ng; Editing by Florence Tan and Jane Merriman)
